China to Widen Funding Vehicles for Struggling Small Businesses

China will diversify access to funding and offer privileges in bond issuance and tax breaks for cash-strapped small businesses to fuel the private sector, a senior official with the nation's banking regulator said.

The government will tailor some funds in line with the needs of small businesses, according to Xiao Yuanqi, a senior official with the China Banking Regulatory Commission.

"We should maximize the role of direct financing and provide collateral and guarantee services to help business startups get money," Xiao said.

The Shanghai Stock Exchange is doing a feasibility study on establishing private equity funds for small and midsized firms and has lowered the threshold on net assets for prospective bond issuers.

The banking regulator had previously released a circular stating that this year's increment and growth in credit given to small businesses should outstrip those recorded last year. The growth rate in loans made to small business was almost 10 percentage points faster than the growth in overall lending, and loans taken out by small businesses in China have exceeded ¥15 trillion, or 27% of total debts, statistics showed.

Xiao also called for setting up a nationwide credit record database, which will help creditors check details of loan seekers and push small businesses to refrain from defaulting.

$1 = ¥6.3

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